Protein Polymer Technologies Reports Third Quarter 1997 Financial Results

    SAN DIEGO, Oct. 30, 1997 -- Protein Polymer Technologies, Inc. (Nasdaq: PPTI), reports today its financial results for the third quarter ended September 30, 1997.  For the quarter, the Company had a net loss applicable to common shareholders of $1,268,000 ($.14 a share), versus a net loss of $719,000 ($.10 a share) for the comparable period a year ago.  The net loss and loss per share amounts include accumulated and distributed dividends related to the Company's preferred stock.  Year-to-date PPTI had a net loss applicable to common shareholders of $3,570,000 ($.39 a share), versus a net loss of $2,410,000 ($.37 a share) for the comparable period a year ago.  The Company ended the third quarter with $2,244,000 in working capital, compared with $840,000 as of December 31, 1996.
    Contract revenues, interest and product income totaled $161,000 for the third quarter, compared to $357,000 for the same period last year.  The decrease was due primarily to reduced contract revenues.  Year-to-date these revenues totaled $549,000, compared to $521,000 for the same period last year. Operating expenses for the quarter were $1,311,000, as compared to $953,000 for the same period in 1996.  Year-to-date operating expenses totaled $3,758,000, compared to $2,563,000 for the same period last year.
    For both the third quarter and year to date periods, the Company continued research and development efforts in its surgical adhesives and sealants program, and expanded its program in hydrogel-based polymers targeted for use in plastic, reconstructive, and urological soft tissue augmentation procedures.  In addition, the Company increased expenditures on implementation of the U.S. Food & Drug Administration's (FDA's) Good Laboratory Practice (GLP) manufacturing regulations.  Products used for conducting preclinical and clinical studies must be manufactured under GLP regulations.
    "Our financial results for the quarter reflects these additional investments, which are justified by the Company's technical progress," said J. Thomas Parmeter, PPTI's President and Chief Executive Officer.  "Our surgical adhesives and sealants program continues to make progress towards product formulation, preclinical and clinical testing.  Additionally, R&D test results in our internally funded soft tissue augmentation program have been very promising.  In early October we received notification from the FDA confirming that our urethral bulking agents will be reviewed as a device under the Center for Devices and Radiological Health (CDRH).
    Protein Polymer Technologies, Inc., a San Diego-based biotechnology company, has developed a protein-based technology platform that allows the creation of new biomaterials which target multiple applications in biomedical markets.  The different classes of biocompatible polymers developed by PPTI have been genetically engineered to enable cell growth, promote the regeneration of tissue, bond to synthetic surfaces and resorb into tissue at controlled rates.  Targeted applications include tissue adhesives and sealants, tissue augmentation, medical device coatings, wound healing, surgical adhesion barriers and drug delivery vehicles.
    This press release may contain forward-looking statements that are based on management's expectations.  Actual results could differ materially from those expressed here; further, the Company is not obligated to comment specifically on those differences.  Risks associated with the Company's activities include scientific and product development uncertainties, competitive products and approaches, continuing collaborative partnership interest and funding, regulatory testing and approvals, and manufacturing scale-up.  The reader is encouraged to refer to the Company's 1996 Annual Report and 10-KSB, and recent filings with the Securities and Exchange Commission, copies of which are available from the Company, to further ascertain the risks associated with the above statements.

<

                      Protein Polymer Technologies, Inc.
                        Condensed Financial Statements
                                 (unaudited)

                                 Three months ended         Nine months ended
                                 September 30,              September 30,
                              1997          1996         1997          1996
    SUMMARY OPERATIONS
    Contract revenue       $91,510      $310,000     $324,510      $410,000
    Interest income         41,151        26,206      162,885        65,263
    Product and other
     income                 27,840        21,140       61,744        45,664
    Total revenues         160,501       357,346      549,139       520,927
    Total expenses       1,311,291       952,872    3,757,851     2,562,680
    Net loss          $(1,150,790)    $(595,526) $(3,208,712)  $(2,041,753)
    Undeclared accumulated
      and/or paid dividends
      on Preferred Stock   117,657       123,639      361,569       368,228

    Net loss applicable
      to common
      shareholders    $(1,268,447)    $(719,165) $(3,570,281)  $(2,409,981)

    Loss per share         $(0.14)       $(0.10)      $(0.39)       $(0.37)

    Weighted average shares
      used in computing loss
      per share          9,332,156     7,008,171    9,173,040     6,445,343

                                    As of                   As of
                           Sept. 30, 1997           Dec. 31, 1996

    BALANCE SHEET INFORMATION                           (audited)
    Cash, cash equivalents and
      short-term investments  $ 2,488,644              $1,260,399
    Working capital             2,244,001                 840,196
    Total assets                3,455,527               1,746,581
    Total capital invested     25,537,536              20,456,360
    Accumulated deficit      (22,838,290)            (19,207,237)